Taxation on Harmful Products to Improve Public Health and Revenues in Brazil: World Bank

The World Bank stresses that Brazil has a unique window of opportunity to enact this reform as part of its broader tax agenda.

Brazil stands at a crucial juncture where it can leverage its ongoing tax reform to improve public health by strategically taxing harmful products such as tobacco, alcohol, and sugary drinks. A new policy note from the World Bank outlines key technical recommendations on how Brazil can structure and implement excise taxes on these products to reduce preventable deaths while increasing tax revenue.

The tax reform, made possible by Constitutional Amendment 132, opens the door for such measures. The proposal can be implemented through the Selective Tax discussed in the Complementary Law currently under review in the Senate, and through an Ordinary Law expected to be introduced in Congress in 2025.

Annually, around 341,000 deaths in Brazil—approximately 20% of all fatalities—are linked to the consumption of tobacco, alcohol, and sugar-sweetened beverages. These products are leading contributors to chronic diseases such as cardiovascular disease, cancer, diabetes, and respiratory conditions. By raising excise taxes on these harmful products, Brazil could significantly curb their consumption, ultimately preventing a large number of these deaths.

Taxation to Reduce Consumption and Improve Health

The World Bank report emphasizes that the prices of tobacco, alcohol, and sugary drinks in Brazil are low compared to other countries in Latin America and the Caribbean (LAC) and the G20, making these products highly affordable. The affordability drives their high consumption, especially among low-income households. Increasing the cost of these products through targeted health taxes would discourage consumption, directly addressing the health crisis.

From a public health perspective, reducing the intake of these products would lead to substantial decreases in preventable diseases and deaths. Even as consumption declines, higher taxes will ensure that the government collects more revenue, offsetting potential losses in sales.

Targeting Low-Income Households for Maximum Impact

The policy note highlights that low-income households will experience the most significant health benefits from these tax reforms. Research shows that lower-income populations are more responsive to price changes. Substantially increasing the prices of tobacco, alcohol, and sugary drinks would lead to a more significant reduction in consumption within this group. Currently, many deaths from diseases linked to these products occur among the poorest households, so this demographic stands to gain the most in terms of reduced morbidity and mortality.

In addition to saving lives, the policy would also enhance productivity and improve Brazil’s human capital by fostering a healthier population. As public health improves, economic outcomes will follow, with fewer people burdened by chronic diseases and disabilities, particularly in vulnerable communities.

Seizing the Opportunity

The World Bank stresses that Brazil has a unique window of opportunity to enact this reform as part of its broader tax agenda. By implementing well-designed health taxes on tobacco, alcohol, and sugary drinks, the country can not only save countless lives but also strengthen its public finances.

This strategic taxation policy, if adopted, would offer a dual benefit: improving public health while simultaneously boosting tax revenues. For Brazil, this means an opportunity to make lasting improvements to both the health and economic well-being of its citizens.